ML20249B335

1997 Annual Rept for Corn Belt Power Cooperative

ML20249B335
Person / Time
Site:	Duane Arnold
Issue date:	12/31/1997
From:	Drager E CORN BELT POWER COOPERATIVE
To:
Shared Package
ML20249B329	List: ML20249B333 ML20249B335 ML20249B339 NG-98-1003, Forwards Annual Repts for Alliant-IES Utils,Inc,Corn Belt Power Cooperative & Central Iowa Power Cooperative IAW Requirements of 10CFR50.71(b)
References
NUDOCS 9806220332
Download: ML20249B335 (25)

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g ) A Corn Belt Power Cooperative ~-:-i  ;

rt A Powerful Partnership for 50 Years.: ' ' -

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J In 1997, Corn Belt Power Cooperative . ,  ;

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gv,3 y m, , 7 7ep , gi.; stands strong as a power supplier ' 4 M ' and committed partner serving more f j h,d}w k Eb - ..

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' . cooperative'50 long years ago and to

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Executive Report 1997 marked the soth anniversary of Corn Beit The success we have had in marketing to new Power Cooperative. During 1997, we looked back on industrial and municipal loads and to residential mem-all of the powerful partnerships that helped shape Corn bers has necessitated a review of our load and capabil- )

Belt into the successful organization that it is today. ity forecasts. During 1997, we completed an integrated While it is important that we remember our past and resource plan which gave us direction for the future.

honor those who have gotten us to where we are today, Suggestions in this plan include examining ways to it is also necessary that we pay tribute to our past by better use our strengths alor g with the strengths of sharing our forefathers' vision for the future. others, developing new rate structures for ir.terruptible rates and real-time pricing, and working with others to You can see from this report that 1997 was a very expand our generating capability.

successful year for Corn Belt Power. Recorde were set in sales and margins. Rates continue to trend down- , .

ward. This success is a direct result of the efforts of our

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board, member cooperatives and employees. 4 4

The success we have ...

had in attracting new ~

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industrial and municipal n,u i nmn s .a.,s loads is a direct tribute to go, the vision of those who nm,,

instituted an economic Uns - 'f .

development program over m p,,,$ n, ns,nn ..

10 years ago. This program Ud f -

came at a time when rural N ,  :-

residential sales were .""^

declining. Through the W"' Nik efforts of the Iowa Area Development Group and our member cooperativ:s,

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along with programs .

developed by Corn Belt, we nuo w .,osa,#, nmo, .

have seen industrial and g m , ,, , .

A municipal sales more than donble in a 10-year time 8 m M. O- DD frame. President Executive Vice President and General Manager in addition to our successful programs that attract industrial and municipal loads, we put in place Much of 1997 was spent on planning the best way a residential program several years ago called Power to leverage Corn Belt for the future by sharing with Olympics. This program concentrates on expanding others. This effort gave us great insight into how Corn residential marketing. Marketing electric heat, water Belt can better position itself for the future, heaters and others products has shown a great deal of success. This program has not only added to our We also spent a great deal of time during 1997 sales base, but has fostered a strong sense of teamwork reviewing our rate designs and structures. It is obvious among our member co-ops, Corn Belt, employees and that our current firm rate structure has been very sec-directors. cessful in attracting new loads, but we took a long hard 2

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i look at possible improvements. We completely reviewed y TOTAL CORN BElikWh 5 ALES i our interruptible rate and made significant changes to better reflect our costs and give our customers choices. 1,000 We also designed a real-time pricing rate that is one of the first in the region to allow customers the option of using electricity during certain critical periods. 600 Because of our growth, there was significant expan- 4a sion of our transmission and substation infrastructure re during 1997. Additions resulted in a system that is even more reliable than what we had previously. Reliability ,

continues to be a point of emphasis with Corn Belt and ma ms m7 m919n 19731975 i,7919si 19s3 i,ss 19s719:919911993 i,951997 its members, and will continue to be a part of our transmission planning far into the future.

Change is taking place at an unprecedented pace in "/7$8@

the electric utility industry. During this time of change, 7,m.s20 Ts- u6 it is important that we keep our focus, as our forefathers 13s 4si sn i,n6 4,752 did, on serving our members with the most competitive  : 29,o92,2s4 m.m i,m rates possible, while at the same time preserv ng our 29,393.425 sis.7 1,527 traditionally high reliability. k 3s,129,113 753 6 1,290 As we prepare for the changes in our industry, we

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• 5"'* n227 i,7m have committed ourselves to improving communica- -_ _

. .  ? 46,65i,682 934 - i,499

t. ions with all those who have a stake in Corn Belt. l This includes those nationally as well as locally. We 104,428,496 2, 47 ~ 2,95:

have.mstituted a program to convert all of our com- lE puter-related functions to satisfactorily deal with the a 117,080.280 i,062.96 1,992 4

" year 2000 problem." All of our accounting functions - 4 and most of our other functions will be converted during 1998. j skw You can see that Corn Belt has been very successful m MEMBER REC COSTS 50 during our previous 50 years and especially during

) .g l l Ll 1997. We cannot rest on our laurels, however; we must build on our traditions and properly position ourselves 45 40 j

for a future that will certainly be different from our past. 35 g g 30 We feel very confident that we will be successful, thanks to the commitment that has been made by our 25

/R B B E board of directors, our distribution cooperatives and our 20 f g g g employees. The insight of those who shaped Corn Belt 15 in the past will serve us well as we go confidently into 10 - k ~

the future $ -5 1

n 1977 1982 1987 1992 1997 Average RIC member system cost,incluang substation charge; colculated ovetage REC rate reflects power sold to municipals served by RECS.

3

Year in Review When Corn Beit Power Cooperative ceiebrated construction its 50th anniversary in 1997, it was a time to look at the Corn Belt crews were busy during 1997 with history and future of the cooperative and the powerful numerous construction projects, completing new partnerships that made and will keep the organization sections of line and new substations to fulfill requests strong. from member systems. Construction projects were nitiated to serve new loads and increase reliability in 50th Anniversary several areas of Corn Belt's service territory. The The 50th anniversary celebration kicked off at Projects included:

the annual meeting on April 8,1997, with a video highlighting important events of Corn Belt Power's . Completion of the Snell

• Construction of the 69 kV Substation and the 69 kV Snell Unverferth Substation near formation and history. A traveling display featuring Tap east of Fort Dodge Shell Rock photos of yesterday plus technology of today was on

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• Completion of the Webster

• Construction of 3.5 miles of s;te at many member systems' annual meetings during dual circuit and expansion of the 69 kV Laurens-Marathon the year. Over 750 people attended an open house at 161-69 kV Webster Switching line Station Corn Belt's headquarters building on Aug. 20. The open . Installation of 69 kV capacitor house included tours of the facilities, video shows, . Construction of five miles of banks at Wallingford Switch-69 kV kne southeast of ing Station and Pocahontas history displays, equipment displays and a lunch served fstherville Switching Station by employees and directors. The 50th anniversary . Construction of a new 69 kv celebration concludes with the publishing of a history distribution substation in the Hampton Air Industrial Park booklet chronicling Corn Belt's first 50 years of operation.

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director representing Midland

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W *. display. The display was on site

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'with reliability Several new substations and sections of transmission line were constructed during 1997 tofulfill n eye 55 of requestsfrwn members. The newfacilities serve new loads and increase reliability in several areas of 99.99 percent Corn Belt's service territory. Photo top left: Electricians Rich Mm Gorp and Rick Skow assemble bushings onto a transformer to be used in a new substation. Upper right: An 84 nNa transformer is gy7lng gg, moved into the expanded portion of the %bster Substation. Below: Randy Rohr, lineman, works on Ytar.

the 69 kVSnell Tap east ofFort Dodge.

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n J be added to its system. Corn Belt and Iowa Lakes 6w f M.0.. '. '%q y. - .. 3. p 6'1j.. Electric Cooperative were chosen to serve Estherville y'4, 4 E,

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' 4:(m. e T ?!L!,3.;f.W. I Municipal Utilities with wholesale po n ..

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. q ; h .l ". " June 7 1,1998. 0 YNorthernh' YBorder Pipeline also announced h 2M h . [ t at a natural gas pumping station will locate on h

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gC Total Corn Belt sales reached an all-time high in hl,'( ' L

$ ~,', L 1997, topping 1.1 billion kilowatt-hours. Sales to RECS, y .** ,

. 1 f 'i Webster City, NIMECA and others surpassed the c .# c 1 1.4 previous record set in 1996 by 3.4 percent. New and N

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expanding commercial and industrial loads plus a warmer than average summer contributed to the a .

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h [k f Generation f* gh A / A variety of activities occurred at Corn Belt's j l, n c 4 = ' N... generating facilities during the year. At the Wisdom j j Q @+. .

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Station, Spencer, a new control system was installed j . jPg[fjN ; j and tested. Corn Belt purchased approximately 30,000 6- W ; ' ip tons of coal to fuel Wisdom's operation throughout

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Duane Arnold Energy Center, Palo, Corn Delt's 1997 and was approved by the Corn Belt board and jointly-owned nuclear plant, received supericr perfor- submitted to the Westem Area Power Administration mance ratings from the Nuclear Regulatory Commis- for acceptance. WAPA accepted the plan and Corn Belt sion in operations, engineering and plant support, will file its first annual progress report in 1998.

DAEC underwent a refueling operation in record- RUSloan setting time. In 1997, the Rural Utilities Service (RUS) approved At the Humboldt Station, PCB-filled transformers a loan totaling $32 million for Corn Belt Power.

were removed from the plant to reduce environmental Projects to be financed by this loan include construction risk and an electronic surveillance system was installed, of new transmission and substation facilities and eliminating the need to continue staffing the plant, The additions to existing power plants.

surveillance equipment is monitored 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day p y 73, 7,y,,y g m m , % g from the control center at Corn Belt Power headquar-

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Rates Corn Belt Power reviewed its wholesale power ~ D f _l rates during 1997. The basic wholesale firm rate was

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rates for commercial and industrial loads, to be imple-mented in 1998, were established. An integrated

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. Transformers were removedfunn Humboldt Station. Installed when hyg the plant was built in 19.50, the transformers contained PCBfluid,

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~ which has come under strict envinmmental regulations.

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y A representativefrom Sega, Inc., an engineeringfirm, assists Ray 1.\ Lathn>p, electrictd andcontrol, with installation ofnew combustion

control equipment at Wisdom Station. Spencer

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I Marketing units Water Heater Ref(acement Program An end-use survey was completed early in 1,000

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• P'**5 1997, with results showing consistent levels of electric heat and electric water heater saturation 600 g . . . . .

among distribution co-op members. s Changes were made in Corn Belt's marketing 600 .

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plan. Phase two of the Sales Staff Assistance 400 ,. .

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Program began in January with an intent to 200 increase time spent on key account activities and offering diversified products and services t -

0 members. Using results from the three-year heat im 1985 im mi ms 1989 im mi m2 im im ms m6 im N/ Rep! ce FossUnl E Repor/ Replace Electric i meter study and the integrated resource plan, Corn Belt and its member systems simplified hie: Dato prior to i990 did not differensioie type of waier heater replaced electric heat rates by offering one rate instead of three. Load control components of the marketing plan Corporate Relations were eliminated with changes effective in 1998. Corn Belt Power launched its home page on the

. World Wide Web early in 1997. A variety of informa-Installat. ion of electric t ater heaters and electric .

tion can be found at www.cbpower.com, with current resistance heat reached all-time highs in 1997. Like- . . .

. . . event entries updated as new . i.m ormation is avadable, wise, mstallation of heat pumps reached the highest .

. A weekly publ.ication, Current Cmmection, was intro-level since rebate programs began in the m.d-1980s. i .

duced as a communication link for employees and directors.

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The line crew moved into the new Emmetsburg Service "

Center in Dect mber 'the new building includes heated A' vehicle bays, a wash bay, of] ices and storage space. -

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Dear. Jensen. lineman,

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bay that is heated with electriefloor cable. W '

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In 1997, a new computer network was installed at TOTAL CORN BELTkWh SALES Corn Belt, facilitating access to the Internet and com- Monthly Percent Change /1997 campered to 1996 munication via e-mail both internally and externally. - .

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Near the end of the year, the Corn Belt Power board voted to become a regional partner in the k  % ~~

Touch nergy" Touchstone Energy branding 5%

campaign developed by the NRECA. In a competitive n environment, the brand name will remind consumers of 5% .

the personalized, local service that distinguishes coop- .i3 eratives from other electric utilities. y,,

Economic Development h ,3gyyyy333[

Board action during the year continued to empha- Includes RECS, Webster Oty, NIMECA & Sales to others size the importance of economic development both for today's bottom line and tomorrow's competitive 1997 GENERATION

SUMMARY

strength. Corn Belt and member system partnersh.ips , ,, ;g_ , g gg ,,

assisted in:

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j Reconstruction of Wiuff Milling near Humbold gj3g f* Expansion of Simonsen fron Works in Spencer ~ 3B DAEC g

' e Construction plans for a speculative industrial - (37,9ss me) 'y .

33.B ~ (142 st3 mm)

" building in Webster City ""#" *

• Expansion of Vantec in Webster City

'e Location of Brown Medicalinto the Lakes -  !

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! Business Park in Spirit Lake le Launch of a speculative housing program

'with Calhoun County Electric Cooperative Association T* Location of All Star Pro Golf into the Spencer Technical Park '

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WAPA e Construction of a speculative industrial qg building in the Humboldt Industrial Park . - 038,554 m

• Location of Heartland Pork's mill into the Iowa Falls industrial Park

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• Expansion of Maurer Manufacturing in Spencer .

( e Sale of the Fredericksbijrg speculative

' f industrial building to LlW Corporation i e Location of GL Coating Corporation into the - kW (Orn Bell Monthly 60-Minute System Peak 220,2

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• Construction of the Iowa Corn Processors com l J-  : -

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• Location of Hired Hand Inc. into the Iowa Falls Industrial Park 180,m 5f } {  !- .

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Other Board Action L

. q.. e, .s . . .. . _v-In other board action, directors allocated $1 million n0'000 ,_... g . _ .

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in deferred patronage to members from 1996 margins 120,000 and approved payment of $523,835 in deferred patron-age. The board approved a new contract with the *'*

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International Union of Operating Engineers Local No. - 1997 - 1996 - 1995 234. Also approved was the construction of a new C'5 8'h 5Y** P"k dfC" W*' 0'Y " l S' '"h""I WW 'O'"i"" 5Y5'** P"k facility for the Emmetsburg Service Center. $

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Dostald I;cidman Donald O 14x>l Henger Hust 4 Ilutirr ( ounty Riit ] ( alisuun ( ounty I( -t 3 I ranklui Hl <

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+ugene iwager ]i( i surdy aange. 9 Aciiii < <ide' f tunilw'inds ( onset > M Ipira takem Ehtric (mer . 4tkiland INm er ( o op 10 m

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' Corn Belt Power Cooperative 1997 Board of Directors a usse n w r.ex

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M,l0W5 I O-(samanisessenedWIMEA unici 1 1 ,Bjg3yaglgctrj,c,,gggperative { rth(ow 2 Bt, tier County REC Association (NIMECA) 3 Ca.thoun County Electric Cooperative Association includes munic'ipal electric 4 Franklin REC

• Alta 5 Glidden REC ,

[n pids 6 Grundy County REC

• Graettinger

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7 Hancock County REC , gu s 9 lowa Lakes Electric Cooperative Milford 10 Midland Power Cooperative P" nc 11 Sac County REC gmner 12 Wright County REC . West Bend 11

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I BALANCE SHEETS December 31,1997 and 1996 ASSETS 1997 _

1996 ELECTRIC PLANT (Notes 2 and 6):

In service .... . . . . ... . . . . . . . .. . . $ 210,897,843 5206,509,008

( Less-accumulated depreciation . .. . . .. 123,816,726 87,081,117 jl6,349,862 90,159,146 Construction work in progress . . . . . .. 2,301,454 906,588 Nuclear fuel, net of amortization (Note 2) . . 5,154,084 4,803,751 94,536,655 95,869,485 OTHER PROPERTY AND INVESTMENTS:

Nonutility property. . . . . . . . . . 290,716 343,766 Investment in the National Rural Utilities Cooperative Finance Corporation (Note 2) . . . . . . . 2,515,201 2,515,343 Land held for future use (Note 8) . . . . . . . 2,963,060 2,963,060 Decommissioning ftmd (Note 2) . .. . 13,694,236 11,457,176 Other investments and receivables (Notes 2 and 10). . . ... . . . . 4,388,969 6,263,203 23,852,182 23,542,548

+

CURRENT ASSETS:

Cash and cash equivalents (Note 2).. .. 6,480,795 6,400,701 Member accounts receivable . . .. 4,737,418 3,688,298 Other receivables . . . . . 260,924 368,465 Irrentories -

Fuel, primarily coal, at last-in, first-out cost .. 880,790 1,253,028 Materials and supplies, at average cost. . . . 2,786,285 2,654,819 Prepayments . . .. . . . . . 475.532 1 027.077 15.621.751 15.392.388 DFFERRED CHARGES:

Deferred Department of Energy

'O decommissioning costs (Note 12) .. .. 1,367,499 1,516,849 Deferred spent nuclear fuel disposal costs (Note 9) .. . . . . . . . 0 240,264 Deferred refueling costs (Note 2). . . . . . . 250,486 1,372,185 Unamortized refinancing cost . . .. 13,903 80,616 w . Other . .. .. . .. 105.403 209.755 1.737.291 3.419.669

$135,747.879 5138,224,090 p7 The accompanying notes to the financial statements are an integral part of these statements.

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h BALANCE SHEETS December 31,1997 and 1996 MEMBERSHIP CAPITAL AND LIABILITIES 1997 1996 AiEAiBERSHIP CAPITAL:

a

" *n Memberships, at $100 per membership . . $ 1,400 5 1,400 Deferred patronage dividends, per accompanying statements (payment restricted as indicated in Note 3). . .. . 8,333,683 7,857,518 Other equities, per accompanying statements . . 17,689,498 14,629,256 Unrealized gain in market value ofinvestments (Note 2) . . . .. 1,038,487 642,900 27,063,068 23,131,074 LONG-TERAI DEBT (Note 4):

Rural Utilities Service . . . 34,847,585 36,995,046 Federal Financing Bank. . . . . . 63,008,377 65,135,398 Capital lease obligations (Note 2) .. . 2,649,972 3,554,335 Pollution control revenue bonds . . 2,165,000 2,320,000 7 02,670,937 108,004,777 Less - Current maturitics oflong-term debt . 5,080,561 5,297,862 97,590.376 102,706,915 OTHER LONG-TERAI LIABILITIES:

Dcferred Department of Energy decommissioning costs (Note 12) . . 1,142,274 1,296,054 n Deferred compensation . . . 60,465 105,269 46,203

~

Other . .. ... . . . . . 191,100 1,248,942- 1,592,423 p-CURRENT LIABILITIES-  !

Current maturities oflong-term debt . . 5,080,561 5,297,862 Accounts payable . . . . . . 2,055,996 2,742,895 t Accrued property and other taxes. . 2,192,484 2,212,279 l Accrued interest and other . 516,452 540,642 l 9,845,493 10,793,678 l t a

$ 135,747,879 $ 138,224,090 7 .l The accompanying notes to the financial statements are an integral part of these statements.

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1 STATEMENTS OF REVENUES AND EXPENSES 79 For the Years Ended December 31,1997 and 1996 3;

1997 1996 OPERATING REVENUES:

Sales of c!cctric energy . .. $ 42,436,264 $ 42,445,125 Other . . . . . . . . .. .. . . . . 3,764,049 3,077,584

-46,200,313 45,522,709

_X L OPERNflNG EXPENSES:

f Operation -

f Steam and other power generation . .. 15,086,530 14,852,868 0 Purchased power, net . . . . . 2,023,483 2,260,981 Transmission. . . .. 1,748,021 1,578,411 Sales . . . . 930,553 722,743 Administrative and general ... .. .. 3,178,835 3,496,488 Maintenance -

Steam and other power generation . . 3,589,686 3,595,540 o Transmission. . . . . . . . .. . 590,788 624,176 General plant . . .. . 17,766 19,786 Depreciation and decommissioning (Note 2) . 6,786,405 6,968,131 Property and other taxes . . . 2,308,312 2,281,030 36,260,379 36,400,154 Net Operating Revenues ., . 9,939,934 9,122,555 INTEREST AND OTHER DEDUCTIONS:

Interest on long-term debt.. . . . 6,929,676 7,189,255 Other interest (Note 2).. .. . . . . . . 1,017,067 809,818 l- . Interest during construction (Note 2) . (196,611) (134,452) 7" '

Provision for impairment ofland (Note 8) . 0 103,G0 Other deductions. 33,253

. . . 3,536 Amortization of reacquired debt (Note 4). . . 66,713 176,511 Amortization ofloan expense... .. . 20,752 20.752 7.870.850 8.169.240 7

NET OPERATING MARGIN . . . 2.069.084 953.315

- NON-OPERATING MARGIN:

t-c Interest and dividend income . . . . . 921,685 960,629 Other, net . . . . . . . . . . . . . 987,163 604.592 1,908,848, 1.565.221 NET MARG 1N . ... . .. .. . . $ 3,977,932 5 2,518,536 s

The accompanying notes to the financial statements are an integral part of these statements.

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i STATEMENTS OF CASH FLOWS 9

. For the Years Ended December 31,1997 and 1996 (Note 2) 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin. . . . . . . . . . ... .. $ 3,977,932 S 2,518,536 Adjustments to reconcile net margin to cash provided by operations:

Depreciation and amortization. . . . . . . 6,231,358 6,165,553 Amortization of nuclear fuel . . . . 2,040,633 2,273,375 Amortization of deferred refueling costs.. . . . 1,212,508 1,416,108 Amortization of spent nuclear fuel disposal costs .. .. . . . . . . . .. 240,264 160,176 Amortization of refinancing cost . .. 66,713 176,511 Amortization of Department of Energy decommissioning costs.. . . . . . . . . . 149,350 115,391 1, Provision for impairment ofland held

g for future use . .. . . . . . . . 0 103,820 2 Changes in current assets and liabilities

Accounts receivable. . . . . . . . ... (941,579) (1,216)

Inventories .. .. . . . . , . . . . . 240,772 (285,413)

Prepayments .. . . . . . . . .. 551,538 5,289

(

Accounts payable . . . . . . . . . . . . . . . (686,899) (279,633)

Accrued property and cther taxes . . . (19,795) (61,965)

Accrued interest and other liabilities .. .. (29,704) (1,295,965)

Payment to Department of Energy for decommissioning..... . . . . . . . . . . . . (272,176) (236,531)

, Other . . . . . .. . . . . (85,349) (14,727)

Net cash provided by operating activities.. .. 12,675,566 10,759,309

- CASH FLOWS 1 ROM FINANCING ACTIVITIES:

Repayment oflong-term debt . . . . . . . . . . (5,333,840) (5,577,631) ,

Deferred patronage dividends paid... . . . . (523,835) (489,737) g '

Cash provided from C"'S fund (Note 10). 2,046,442 86,128 Net cash used in financing activities . . . . . . (3,811,233) (5.981,240)

CASH FLOWS FROM INVESTING ACTIVITIES:

6 . Additions to electric plant, net . .. . (4,654,465) (1,313,731)

Additions to nuclear fuel . .. . . . . . (2,390,965)- (2,024,135)

Change in deferred refueling costs . . . . ... (90,809) (1,571,004)

Sale of non-utility plant. ... ... .. 53,050 36,304 W .. . . Purchase ofiand held for future use . . . .... . .. 0 (1,481,530) 1 W - Additions to decommissioning fund .

. . . (1,841,473) (1,543,513)

Change in other investments. . . . . . 140,423 2.042.444 r Net cash used in invesung actmties.. .. (8,784,239) (5,855.!65) .,.<

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80,094 (1,077,096)

{_ Net increase (decrease) in cash and cash equivalents .

r x . CASH AND CASH EQUIVALENTS AT: y D

R Beginning of ycar.. ~................ 6.400.701 7.477.79]_ ij

End of ycar . . .. . .. . . . . . . .. $ 6,480,795 5 6.400.701 ,

L I r,

The accompanying notes to the financial statements are an integral part of these statements.

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STATEMENTS OF DEFERRED PATRONAGE DIVIDENDS i i

AND OTHER EQUITIES  !

For the Years Ended December 31,1997 and 1996 1997 1996 DEFERRED PATRONAGE DIVIDENDS:

Balance assigned beginning ofyear. $ 7,857,518 S 7,347,255 Net margin . 3,977,932 2,518,536 Revenue deferred patronage dividends . 82,310 58,600 11,917,760 9,924,391 Patronage dividends paid . (523,835) (489,737)

Appropriation of margin -

Reserve for contingent losses . . (2,810,242) (1,327,136)

Statutory surplus .. (250,000) (250,000)

Balance assigned end of yea: . $ 8,333,683 $ 7,857,518 OTHER EQUITIES:

(Appropriated Margins) p Reserve for j Statutory Contingent "

Surplus losses Total Balance December 31,1995. S 3,349,484 S 9,702,636 5 13,052,120 Appropriation of margin . 250,000 1,327,136 1,577,136 Balance December 31,1996. . 3,599,484 11,029,772 14,629,256 Appropriation of margin . 250,000 2,810,242 3,060,242 Italance December 31,1997. S 3,849,484 5 13,840,014 S 17,689,498 The accompanying notes to the financial statements are an integral part of these statements.

NET MARGIN EQUllY/IOTALASSETS Wimof Dohs Fenentage 4.0 !t 26 .

3.5 1 3.0 Op 20 18 2.5 : $

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NOTES TO FINANCIAL. STATEMENTS becember 31,1997 and 1996 NOTE (1) ORGANIZATION:

Corn llelt Power Cooperative (the Cooperative) is a Rural Utilities Service (RUS) financed generation and transmission cooperative created and owned by 12 distribution cooperatives and one municipal cooperative association. Electricity supplied by the Cooperative serves farms, small towns and commercial and industrial businesses across 27 counties in north central lowa.

The Cooperative's lloard of Directors is comprised of one representative from each member cooperative and is responsibic for, among other things, establishing rates charged to the member cooperatives.

NOTE (2) SIGNIFICANT ACCOUNTING POLICIES:

U The Cooperative maintains its accounting records in accordance with the Uniform System of

, Accounts as prescribed by the RUS. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could difTer from those estimates. The significant accounting policies are:

A. Electric Plant -

Electric plant is stated at original cost which includes payroll and related benefits, sales and use taxes, property taxes and interest during the period of construction.

Costs in connection with repairs of properties and replacement ofitems less than a unit of

, property are charged to maintenance expense. Additions to and replacements of units of a property are charged to electric plant accounts.

B. Depreciation and Decommissioning -

Depreciation is provided using straight-line methods and RUS-prescribed lives. These provisions, excluding nuclear facilitics, were equivalent to a composite depreciation rate on gross plant of 2.74% and 2.72% for 1997 and 1996, respectively.

Under a joint-ownership agreement, the Cooperative has a 10% undivided interest in the Duane Arnold Energy Center (DAEC), a nuclear-fueled generating station, which was placed in service in 1974. The Cooperative is depreciating its interest in the DAEC and each year's property additions subsequent to 1984 on a straight-line basis over the remaining term of the initial Nuclear Regulatory Commission license for DAEC (2014). The composite y depreciation rate on gross plant for DAEC was 3.36% and 3.34% for 1997 and 1996, respectively.

A Nuclear Regulatory Commission estimate of the decommissioning costs of DAEC was updated in 1997. This report estimated the Cooperative's share of the decommissioning costs 9 of DAEC to be approximately $40,094,552 (in 1997 dollars). The Cooperative is providing fd - for overall nuclear decommissioning costs using a funding method which assumes a 5% rate of inflation and 3% real rate of return. The method is designed to accumulate a decommissioning

1. . reserve suflicient to cover the Cooperative's share of decommissioning costs by the year 2014.

Decommissioning costs are included in depreciation and decommissioning expense, in

'the Statements of Revenue and Expenses. Such costs were S762,555 and $1,051,066, for <

p 1997 and 1996, respectively.

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< NOTES TO FINANCIAL STATEMENTS I December 31,1997 and 1996 The total decommissioning funds accumulated at December 31,1997, were

$13,694,236, of which $8,257,102 has been placed in a fund legally restricted for use in decommissioning DAEC. The remaining $5,437,134, while not legally restricted, has been designated by the Cooperative for use in decommissioning DAEC. The interest component shown as other interest was $1,017,067 and $809,818 for 1997 and 1996, respectively.

M' C. Nuclear Fuel- D

[ The cost of nuclear fuel is amortized to steam and other power generation expenses based on the quantity of heat produced for the generation of electric energy. Such amortization was I

$2,040,633 and $2,273,375 for 1997 and 1996, respectively. .

.n D. Deferred Refueling Costs -

The Cooperative defers extraordinary operation and maintenance expenses incurred during refueling outages of DAEC. These costs are being amortized to expense based on the expected generation of the next fuel cycle which corresponds with the period the Cooperative

- is recovering these costs in its rates. Such amortization was S1,212,508 and $1,416,108 for 1997 and 1996, respectively.

E. Interest During Construction -

Interest during construction represents the cost of funds used for construction and j nuclear fuel refinement. The average rate was 5.6% and 5.7% for 1997 and 1996, respectively,  ;

and is based on the Cooperative's levels and costs of financing. g ,

9 F. Capital Lease - 1 N The Cooperative has a long-term lease agreement with the City of Webster City 'd (Webster City) under which Webster City has agreed to provide certain generation and M transmission facilities to the Cooperative. In return, the Cooperative will pay a minimum  ;;

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~

charge which approximates the debt service on these facilities. The Cooperative has j capitalized this lease and reflected it in electric plant and has reflected the related obligation 1 as a capitallease obligation.

G. Income Taxes - -

The Cooperative is exempt from federal and state income taxes under section 501(c)(12) of the Internal Revenue Code.

H. Statements of Cash Flows -

For the purpose of reporting cash flows, the Cooperative considers temporary cash invest-ments purchased with a maturity of three months or less to be cash equivalents. Cash paid for

, interest, net ofinterest capitalized, was $6,733,813 and $8,413,429 for 1997 and 1996, respectively.

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'I NOTES TO FINANCIAL STATEMENTS December 31,1997 and 1996 I. Cash and Investments - 1 The Cooperative has cash and investments in the following:

1997 1996 b Obligations of the U.S government and its agencies $ 8,778,095 5 7,295,513 3(

Corporate bonds 724,228 646,660 Common and preferred stock 4,197,005 3,528,021 National Rural Utilities Cooperative Finance

, Corporation commercial paper 6,150,000 6,104,831

[ C=h and CDs deposited with federally insured i, fmanc alinstitutions 337,206 302,350 Funds held in trust invested primarily with Iowa Public Agency Investment Trust 1,501,686 3,485,644 4

Economic development investments 2,732,758 2,674,865 g Other investments 143,022 83,196 sm$ $24,564,000 $ 24,121,080 The above investments are included as follows in the g accompanying balance sheets:

Decommissioning fund $13,694,236 $ 11,457,176 Other investments and receivables 4,388,969 6,263,203 Cash and cash equivalents 6,480,795- 6,400,701

$24,564,000 $ 24,121,080 The above amounts include S932,351 and $2,873,829 at December 31,1997 and

(. 1996, respectively, which must be used to fund construction of electric plant.

,, The carrying amounts of cash and cash equivalents and short-term investments of 7 $6,480,795 and $6,400,701 at December 31,1997 and 1996, respectively, approximate the f' fair value because of the short maturity of these investments.The Cooperative's decommis-

. sioning fund investments, which include marketable debt and equity securities, are reported ,

at fair value with unrealized gains and losses reported as a net amount in a separate compo-n nent of membership capital until realized.

The fair value of the Cooperative's other investments and receivables are based on

% quoted market prices for those or similar investments, where available. The fair value and carrying costs of these investments are as follows:

!! 1997 1996 Other investments carrying value $ 992,816 S 2,977,793 Other investments fair value $ 992,860 S 2,977,862

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2 e NOTES TO FINANCIAL STATEMENTS  !

December 31,1997 and 1996 j i

U For other investments and receivables of $3,396,153 and $3,285,410 at I)ecember 31, 1997 and 1996, respectively, for which there were no quoted market prices, a reasonable estimate of fair value could not be made without incurring excessive costs. These investments include $1,000,000 invested in the preferred stock of the Iowa Capital Corporation (ICC).

The ICC is a for-profit corporation established for the purpose of advancing economic development in the state ofIowa. After payment ofoperating costs and certain reserves, the net proceeds ofICC will be paid to the preferred stockholders, including the Cooperative, q until the preferred stock investment plus a 15% cumulative return has been returned. After which, any remaining proceeds will be split 2/3 to the preferred stockholders and 1/3 to the d g' common stockholders (the state ofIowa).

g The Cooperative has an investment of $2,515,201 and $2,515,343, at December 31, 6Y 1997 and 1996, respectively, with the National Rural Utilities Cooperative Finance Corpo-ration (CFC). This investment is required in order to allow the Cooperative to borrow funds from CFC, The investment earns interest of 5% on $2,195,507 which matures between 2070 and 2080 and 3% on S319,289 which matures between 2007 and 2025.

NOTE (3) DEFERRED PATRONAGE DIVIDENDS AND OTHER EQUITIES:

In accordance with the Iowa Code, the Board of Directors is required to allocate a por-tion of the current year's net margin to statutory surplus until the statutory surplus equals 30% of total equity. No additions can be made to statutory surplus whenever it exceeds 50%

of total equity. The Board of Directors appropriated $250,000 of both the 1997 and 1996 net margins to statutory surplus.

4 The equity designated " Reserve for contingent losses" in the Statements of Deferred Patronage 1)ividends and Other Equities is an appropriation of equity by the Board of m Directors. The Board of Directors appropriated $2,810,242 of the 1997 net margin to reserve for contingent losses. There is no statutory restriction of this equity.

~*.

The Board of Directors is permitted by the Iowa Code to allocate the current year's net margin to deferred patronage dividends upon meeting certain requirements and is required to make such allocations if the net margin for the year exceeds specified maximums. The Board of Directors has appropriated $1,000,000 of both the 1997 and 1996 net margins to deferred patronage dividends. Deferred patronage dividends are to be paid in the future as determined by the Board of Directors.

Under the conditions of the Cooperative's mortgages, deferred patronage dividends canno+ a retired without approval of the RUS and the CFC unless the remaining equity meets certain tests. The Cooperative does not meet these tests at December 31,1997.

However, the Cooperative received permission and retired $523,835 of the 1985 patronage y dividends during 1997. During 1996, $297,255 of the 1984 and S192,482 of the 1985 patronage dividends were retired.

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1. NOTES TO FINANCIAL STATEMENTS December 31,1997 and 1996 NOTE (4) LONG-TERM DEBT:

Long-term debt consists of mortgage notes payable to the United States of America acting through the RUS and the Federal Financing Ilank (FF13), capital lease obligations, and notes issued in conjunction with the issuance of pollution control revenue bonds. Substantially all the assets and all rent, income, revenue and net margin of the Cooperative are pledged as collateral for the long-term debt of the Cooperative. Long-term debt is comprised of:

1997 1996 Mortgage notes due in quarterly installments:

RUS 2%, duc 1998-2008 $ 11,042,268 S 12,225,255 RUS 5%, due 1998-2019 23,805,320 24,769,791 FFil 5.5511.8%, duc 1998-2019 63.008.377 65.135.398 97.855.965 102.130.444 Capital lease obligations -

^

Webster City revenue bonds 5.9%, due 1998-2002 2,649,972 3,554,333 Pollution control revenue bonds -

5.8%-6.125%, due 1998-2007 2,165,000 2,320,000

$102,670,937 S108,004,777 Maturities oflong-term debt for the next five years are as follows:

Year Maturity P

1998. ... .. . .. . .S 5,080,561 1999...... .. .. . .. . . ... .. 5,3 66,319 2000.... . . . . .. . . 5,550,459 2 001 .. ..... . ... .. . ... 5,882,890 2002.... . . . . . . . . . . . . .... 6,114,207 In connection with the mortgage notes, the Cooperative had available at December 31, 1997, $3,882,000 from CFC to meet future borrowing needs. The Cooperative had available at December 31,1997, an unused $12,000,000 line of credit with CFC of which $1,000,000 is available only in the event of a nuclear incident.

Based on the borrowing rates currently available to the Cooperative for debt with similar terms and maturities, the fair value of the long-term debt was SI13,365,992 and $114,690,129 at December 31,1997 and 1996, respectively.

NOTE (5) CONSTRUCTION COMMITMENTS:

Total construction expenditures for 1998, including expenditures for the jointly-owned units, are estimated to be $6,668,300, ofwhich S701,500 is for the purchase of nuclear fuel at DAEC.

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NOTES TO FINANCIAL STATEMENTS December 31,~ 1997 and 1996 NOTE (6) JOINT PLANT OWNERSHIP:

Under joint Jownership agreements with other Iowa utilities, the Cooperative had undivided interests at December 31,1997 in three electric generating units as shown below:

Council Neal #4 Bluffs #3 DAEC Total electric plant .. ..... .... . .. $ 44,590,701 $ 14,173,881 $ 67,341,643 Accumulated depreciation ..... .. .. $ 24,918,024 $ 7,237,789 $ 30,469,636 Unit accredited capacity (mW) . .. 624 675 530 Cooperative's share (%) .... .. . .... I1.3% 3.8% 10.0%

, Each participant provided its own financing for its share of the unit. The Cooperative's share

,' of direct expenses of the jointly-owned units is included in the operating and maintenance ex-l penses on the Statements of Revenues and Expenses.

L During 1991, the Cooperative, one ofits members, North Iowa Municipal Electric Coopera-tive Association (NIMECA), and the City of Grundy Center (the City),.a NIMECA member, en-

, tered into a long-term lease agreement for the use by the City of two megawatts of the Cooperative's capacity in the Neal #4 generation facilities. The Cooperative will continue to act as the Neal #4 partner on behalfof the City. The above plant statistics have been reduced to reflect the agreement.

NOTE (7) BENEFIT PLANS:

EfTective January 1,1996, all assets and accumulated plan benefits of the Cooperative's deposit administration defined benefit plan, covering substantially all employees, were transferred to the National Rural Electric Cooperative Association (NRECA) Retirement & Security Program (the e" Program). The Program is a defined benefit pension plan qualified under Section 401 and tax exempt under Section 501 (a) of the Internal Revenue Code. Upon transfer to the Program, the Cooperative's "R accumulated plan benefits exceeded plan assets by $402,695. A moratorium in effect from January 1, 1996 was lifted during 1996 and the past service cost was paid to the Program in 1997. Additionally, the Cooperative recorded a total current period service cost to the Program of $256,116 and

( $469,262 for 1997 and 1996, respectively. In this multi-employer plan, which is available to all NRECA member cooperatives, the accumulated benefits and plan assets are not determined or

, allocated separately by individual employer. The Cooperative also provides a 401 (k) plan, available to

. all employees with the Cooperative matching 25% of the employees' contributions up to 4% of the employees' wages.

@ NOTE (8) LAND HELD FOR FUTURE USE:

@; Allied Power Cooperative ofIowa (Allied) was organized to build a generation plant and related 4

transmission facilities to provide for future power needs. Until 1996, the Cooperative was a 50%

% participant in Allied. During 1996, the Cooperative purchased the remaining 50% of the Allied land ff' for $1,481,530. The book value of the previously-owned 50% of Allied was in excess of the pur-

[ chased 50% interest. As a result, the Cooperative recorded an impairment ofland held for future use P of $103,820 in the Statemer.ts of Revenues and Expenses for the year ended December 31,1996.

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NOTES TO FINANCIAL STATEMENTS December 31,1997 and 1996 NOTE (9) LIABILITY FOR SPENT NUCLEAR FUEL DISPOSAL COSTS:

The Nuclear Waste Disposal Act of 1082 gave approval to the federal government to con-struct a repository fbr the nation's civilian spent nuclear fuel. The Act stated th.u funding fbr this repository would be provided by assessing nuclear generating unit owners a one-time fee fbr spent nuclear fuel being stored on-site at each nuticar facility in April 1983, and by assessing all future energy generated by nuclear facilities at a rate of 1.0 mill per kilowatt hour. The Cooperative is paying the post-1983 fees on a current basis and such fees are being charged to steam and other power generation expenses. The Cooperative has previously paid the one-time fee and is amortiz-ing it to expense over a 13-year period which corresponds with the period the Cooperative is recovering these costs in its rates. A total of $240,264 and $160,176 was amortized in 1997 and 1996, respectively, to steam and other power generation expenses NOTE (10) NIMECA COMBINED TRANSMISSION SYSTEM:

In 1989, the Cooperative and one ofits members, NIMECA, entered into a joint transmis-sion agreement which allows several members of NIMECA an individual undivided ownership interest in and access to the Cooperative's transmission system. The Cooperative has a receivable of $932,351 from a trust established by NIMECA lbr ultimate payment to the Cooperative.

These funds can only be used to fund RUS approved transmission projects. The Cooperative will continue to operate and maintain the system. NIMECA members will reimburse the Cooperative fbr the proportionate sh re ofoperating expenses of the system and will contribute proportion-ately fbr all future capital additions of the system. The reimbursements of the 1997 and 1996 operating expenses were 5550,686 and $543,401, respectively, and were recorded as operating revenues. Additionally, the Cooperative and NIMECA entered into a capacity sharing agreement which provides fbr the sharing of generating resources through at least 2009.

NOTE (11) CLEAN AIR ACT:

The Clean Air Act (Act), as amended, made significant changes in the nation's clean air laws.

The Act's specific amendments to acid deposition control (acid rain) make significant reductions in the amounts ofsulfur dioxide and nitrous oxide emissions allowed on an annual basis nation-wide. The Coopera'ive's coal-fired generating stations are in compliance with the standards established by Ph .e I of the Act and management has begun implementing the program neces-sary to meet the compliance requirements of Phase 11 which will be effective in the year 2000.

NOTE (12) NATIONAL ENERGY POLICY ACT:

The Federal National Energy Policy Act of1992 requires owners of nuclear power plants to pay a special assessment into a " Uranium Enrichment Decontamination and Decommissioning Fund." The assessment is based upon prior nuclear fuel purchases and fbr the DAEC averages approximately $1,266,184 annually through 2007, ofwhich the Cooperative's 10% share is

$140,687. The Cooperative's total assessment of S1,978,529, which will be recovered in rates, has been recorded as a liability, net of payments,in the balance sheets. This liability, totaling

$1,266,184 on December 31,1997, has been recorded with a corresponding deferred charge amortized over a 15-year period, beginning in 1992.

23

NOTES TO FINANCIAL STATEMENTS December 31,1997 and 1996 I

NOTE (13) NUCLEAR INSURANCE PROGRAM:

The Cooperative, under the provisiorn of the Price-Anderson Amendments Act of 1988 (the  !

1988 Act), has the benefit of 58.9 billion of public hability coverage. The coverage consists of

$200,000,000 ofinsurance and S8.7 billion of potential retroactive assessments from 6e owners of each commercial nuclear power plant. Under the 1988 Act Ibr losses relating to nuclear acci-dents in excess of $200,000,000, each nuckar reactor may be assessed a maximum of

$79,300,000 per nuclear incident, payable in annual installments of not more than $10,000,000.

The Cooperative's assessment on its 10% ownership in DAEC may be up to $7,930 000 per nuclear incident with a maximum of $1,000,000 per year. These limits are subject to adjustments for inflation in future years.

Pursuant to provisions in various nuclear insurance policies, the Cooperative could be assessed retroactive premiums in connection with future accidents at a nuclear facility owned by a utility participating in the particular insurance plan. In addition, the Cooperative could be as-sessed annually $720,000 related to coverages fbr excess property damage if the insurer's losses relating to an accident exceed its reserves. While assessment may also be made for losses in certain prior years, the Cooperative is not aware of any losses in such years that it believes are likely to result in an assessment.

In the unlikely event of a catastrophic loss at DAEC, the amount ofinsurance available may not be adequate to cover property damage, decontamination and premature decommissioning. Uninsured losses, to the extent not recovered through rates, would be borne by the Cooperative and could have a matenal adverse effect on the Cooperative's financial position and results ofoperations.

REPORT OF INDEPENDENT PUBUC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF CORN BELT POWER COOPERATIVE:

We have audited the accompanying balance sheets of Corn 'lelt Power Cooperative (a coop-erative association incorporated in Iowa) as of December 31,1997 and 1996, and the related statements of revenues and expenses, cash flows and deferred patronage dividends and other equities fbr the years then ended. These financial statements are the responsibility of the Cooperative's management. Our responsibility is to express an opinion on these financial state-ments based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards req tre that we plan and perfbrm the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis fbr our opinion.

In our opinion, the financial statements referred to above present tairly, in all material re-spects, the financial position of Corn llelt Power Cooperative as of December 31,1997 and 1996, and the results ofits operations and its cash flows fbr the years then ended in confbrmity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP Kansas City, Missouri February 27,1998 24

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! Corn Belt Power Cooperative A Touchstone Energy

• Partner h

130013th Street Nonh, Box 508 ilumboldt, IA 50548-0508 515/332-2571

• www.cbpower.com i

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